Key drivers of customer loyalty in the insurance industry

Agility and empathy are hot topics in the insurance industry as insurers work to build and maintain customer loyalty. It’s a critical time for listening to customers and building long term relationships.

Today, customers expect great customer service and a holistic approach. While historically, insurance has been a “low-touch” industry, that’s no longer the case. One can’t confine the majority of their interactions to the start of the relationship, policy claims, and renewals.

Over time, infrequent and low-quality interactions result in lower degrees of customer loyalty. A company’s customer base can easily switch insurers if they don’t have a relationship with their existing provider.

Digital can be liberating

Years of digital acceleration have been compressed into months since March 2020. This initially disruptive reality could potentially liberate insurers to embrace new ways of working.

Use digital ecosystems as a driver of loyalty to engage with customers along with multiple interaction points. Seize this innovation opportunity by deploying customer loyalty strategies to retain customers and build lasting relationships.

In the following article, we look at key factors driving customer loyalty within the insurance industry. Let’s begin!

Interaction points

Two-way communication and multiple points of interaction are the first of our customer loyalty tips that will bolster customer retention. A 2020 Deloitte Digital study found that 84 percent of customers use web‑based interactions in their buying journey.

This practice has uprooted the traditional insurance distribution model. These days, customers go through an information-gathering phase, using a variety of interaction points. They don’t always, or even usually, buy when searching.

They seek understanding, interaction, and a relationship in this initial stage. However, closer to buying, 55 percent of customers still prefer traditional methods of interaction (i.e., an informed agent).

Insurers must grow proficient at creating omnichannel experiences. The customer should feel connected across all digital and physical interactions.

To meet this expectation, insurers need data on where a customer sits in the buying journey. With a pronounced shift to digital channels and third-party platforms, insurers who decline to innovate can see revenue declines of nearly five per cent.

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Personalisation sounds great on paper, but what does it translate to in real life within the insurance industry? Some examples:

  • Increased transparency
  • Cover based on the context of where the buyer is in their journey
  • Fast response times
  • Timely service

Customers seek a deeper understanding of their personal needs. They need cover that is appropriate for their situation. Personal data value is not lost on the informed consumer of today.

Insurers must respond to these high expectations by providing personalised, valuable interactions.  Industry leaders understand this and strive to deliver a seamless experience and relevant cover.

All external messaging must be a consistent and relevant conduit from one touchpoint to the next. Psychographic segmentation helps insurers identify individual customer segments and provide them with personalised engagement (e.g. first-time homeowners, retirees, college students, families).

The power of data and knowledge of the customer goes beyond personalised messages and extends to contextual cover. Everyone has different insurance needs and cover should fit around their unique needs.

Cohesiveness between insurers’ platforms, and their distributors’ technologies should lead the customer to their desired goal. That’s true whether the motivation is to learn more, contact an insurance agent, or file a claim.

Ecosystem of products

Another piece of customer loyalty advice for insurers: look at ways to innovate or reinvent products and services. Creating an ecosystem that will support customers and proactively adapt with them as their circumstances evolve is the way through.

Insurers must expand offerings and complement the core insurance product lines. Health monitoring adds value for life insurance customers. Consider incorporating multi-policy discount benefits within packages along with more personalized services to match a customer’s preferences. 

Better still, insurers who partner with digital distributors to offer new products can increase their data pool. This makes it possible to offer cover that  dynamically changes with the customer’s circumstances. Auto insurance could automatically adapt to lower usage to reflect changes in routine use.

Other ways in this section to create loyal customers: Expand services offered on mobile platforms beyond searching and buying. Additionally, make the claims process user-friendly, informative, and easy through both native and third-party apps.

Pricing remains relevant

Something else to consider when trying to create loyal customers is this. Customers will pay a premium for perceived value. Perceived value is determined by the product offering, related products, personalised service and proactive cover.

The good news is insurers do not have to begin a race to the bottom on prices. However, they must take great care to ensure the features are worth the premium and build brand loyalty.

Provide customers with high-value service. Communicate this value in a way that is transparent and easy to understand. Customers who can express confidence in their understanding of the product and policy are less likely to switch insurance providers.

We know this to be true because of a 2015 IBM study. During this study, the level of premiums mattered less than the individual’s perception of price fairness.

In fact, too low of a price had the same negative effect on loyalty as one that was too high. A customer who thinks they’re getting great service no matter the cost, is two to three times less likely to switch in a given year.

Value additions

Another thing to consider when seeking a guide for customer loyalty is the value add-on. Go above and beyond the role of a traditional insurer and support customers in areas of personal value.

For example, an auto-insurer could offer weather or traffic updates. This could show customers the insurer cares about the customer’s well-being. Insurers can use social media to share news, tips, networking opportunities, or helpful articles.

Offering risk mitigation or safety tips are other ways insurers can proactively anticipate their customer’s needs. Additionally, offering pick-and-choose options for customers is a great way to increase customer loyalty.

Embrace a modular approach to products in the application architecture to incorporate even more customisation. Scrutinizing in-depth analytics presents the opportunity to balance offerings with consumer demand.

Customer loyalty can see insurers through the changes ahead

Insurers must innovate distribution models and product offerings if they hope to thrive in the years ahead. This is true for remote wholesaling, opening up new channels, and digitally enabling sales forces. Insurers must go beyond traditional insurance models. They must demonstrate empathy and genuine support.

Also, consider driving customer loyalty by enhancing your existing offerings and partnering with third-party platforms to benefit the consumer. Integrating with insurtech players can allow traditional insurers to leverage technology. It can help them provide customers with a contextual insurance experience.